When you start drilling down into the world of real estate mortgage loans, as you’ve no doubt already noticed, you’ll discover a new world of terms and acronyms that seem designed to confuse you! We’ll break down the differences and similarities between lenders and mortgage loan servicers, and provide some tips from experienced buyers to help you navigate the mortgage landscape.
When you apply for a mortgage loan, the credit union, bank, or other institution that actually extends a loan to you is called the lender. The lender is responsible for processing your application including researching your credit and employment history, and the lender’s underwriter ultimately makes the decision based on rules regarding the terms you’ll be offered. In some instances a mortgage broker, who helps connect borrowers to lenders, may assist in processing your application.
Mortgage Lenders – What Do They Do?
Once the mortgage and home purchase are complete, the administrative handling of the mortgage is called servicing. The servicer is the company that manages your loan account. In some cases, the loan owner/lender is also the servicer. Other times, the owner sells the right to service the loan to another company. This sale is called a transfer of servicing rights. Some lending institutions, like credit unions and mortgage banks, will hold and service the mortgages that they offered; other lenders may transfer the mortgage to a servicer. Selling a mortgage to a servicer is normal and should not affect your decision regarding which lender to use. Ordinarily, the deal you can get on the loan itself is far more important than the entity that will service your loan. Under regular circumstances, your interaction with the servicer will be minimal, and it’s not unusual for a mortgage to be transferred to more than one servicer over the life of the loan.
The servicer’s primary job is to handle payment processing, escrow for insurance and taxes and other administrative tasks. If you are selling a home, the servicer accepts the payoff and releases the lien. Also, if you run into financial difficulties, the servicer handles borrower services such as temporary forbearance or other relief. In 2020, servicers offered several COVID-19 pandemic related relief programs. For questions or access to similar programs, your loan servicer is your primary point of contact.
What Does a Servicer Do?
If your mortgage is transferred to a new servicer, the terms won’t change, but read the first mortgage statement you receive from your new lender carefully to verify that all the information it lists is true and accurate. If there are any errors, contact the servicer right away – they will work with you to iron out any differences that you might see from your original loan contract. Remember, your original contract is still binding; the new servicer must honor the terms of the loan as it was signed. At the end of the day, a change of servicer shouldn’t be any issue for you, the borrower. If you have any questions about this, or any other mortgage related issue, call your United Heritage Loan Specialist. We’ll be by your side every step of the way!
What’s The Bottom Line?